MSH v. NMC

FCMC 12373 / 2019

[2025] HKFC 78

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 12373 OF 2019

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JUDGMENT
( Ancillary Relief )

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A.  The Trial

1.  This is the trial of the Petitioner wife’s (“W”) claims for ancillary relief.

B.  H’s knowledge of these proceedings

2.  The Respondent (“H”) did not appear at the trial. Having considered the affirmations filed by W on service, I am satisfied that H has knowledge of these proceedings, he was served with the notice of this trial and the related documents lodged for the purposes of this trial.

3.  The Court records showed that H had participated in these proceedings:

3.1.  H filed into the Court a Form E on 24 December 2020 and an Answer to W’s Questionnaire on 25 June 2021.

3.2.  H attended hearings on 21 September 2020, 30 November 2020, 3 March 2021, 11 June 2021, 24 September 2021 and 4 February 2022 in person.

3.3.  H instructed legal representative to attend the hearing on 30 November 2020 on behalf CM Limited (a company wholly owned by him). CM Limited was joined as the 2^nd respondent at that time in regard to a dispute over one of the properties, which dispute has now been resolved.

4.  There is no reason not to proceed with the trial as scheduled.

C.  The Relevant Facts

5.  W, aged 56, was born in the Mainland and received education up to the secondary school level.

6.  H is 62 years old and has obtained a Master’s degree.

7.  They have a long marriage of about 26 years. The parties got married in January 1993 in Hong Kong. They have one adult son (“Son”) born in 1999. The petition for divorce was presented in 2019 after W discovered that H has been living with a woman in the Mainland for a considerable period of time and they have a child. The decree absolute was issued on 23 July 2024.

8.  The parties came from a humble background. After their marriage in 1993, W was employed as a secretary from 1996 until 2003 when she started her business. H joined his relatives in the operation of a factory in the Mainland in 1996.

9.  In about 2001 or 2002 when H acquired the know-how and the clientele, he set up his own factory under a company named 江門市新會區XX木製品有限公司 (“Wood Company”). This business turned out to be a success and generated much funds for the parties’ acquisition of landed properties.

10.  The parties’ investment in Hong Kong landed properties began in 1999. In around 2001 or 2002, the family moved to a sizeable 3-bedroom unit at about 1127 sq. ft in Hong Kong.

11.  In around 2003, they further took the opportunity of the downturn in Hong Kong property market after the spread of SARS and acquired 7 other commercial properties through limited companies incorporated for property holding. These properties were leased out and generated rental income.

12.  H stationed mostly in the Mainland managing his business there. He only returned to Hong Kong at weekends or long holidays. The management and leasing of the landed properties were done by W in Hong Kong.

13.  In 2003, W set up her own business of retailing Japanese imported snacks through “XX食品有限公司”. This was a successful business venture. At the height of the operation, branches were opened in Jordan and Mongkok.

14.  While both parties were busy with their business, the care of the Son fell on W’s mother and the helper. It was later found out that the Son’s health condition was declining. The parties therefore decided to relocate the Son to Australia. W quitted her business and relocated to Australia in December 2008 with the Son and her parents. H stayed and managed the business ventures and their landed properties in Hong Kong. W assumed the responsibility of bookkeeping and administrative matters.

15.  W was not proficient in English. She had not worked in Australia. Although the Son has reached his adulthood, W still needed to take care of her aged mother who was suffering from cataracts and auditory dysfunction. It is unlikely that she would get a gainful employment in Australia.

16.  The parties had very comfortable living standard during their marriage. They lived in sizeable accommodation in Hong Kong and Australia. They took 3 to 4 trips per year. Both parties declared a monthly expenses of over $100,000 in their respective Form Es.

17.  Since W’s relocation to Australia in 2008, she used to withdraw a monthly sum of $100,000 for family expenses from the companies’ bank account where the rental income and money earned from their investment were deposited. After the divorce petition and up till May 2020, the parties continued to equitably share the fruits of their investments.

18.  However, since May 2020, W discovered that there was insufficient money in the bank accounts for her usual drawings. The bank statement of EK Limited showed that W made the last withdrawal in April 2020. W contended that H deliberately drained the companies’ bank accounts and siphoned the rental income earned from the properties.

19.  On 21 September 2020, H was ordered to pay W maintenance pending suit of $100,000 per month. He has defaulted payment since April 2022.

20.  W contended that apart from the rental income, H failed to disclose his other assets including his mandarin peel business in the Mainland and his Mainland bank accounts.

21.  To achieve a clean break, W proposed that after adding back $11,500,000 being the sale proceeds of Mainland property and W’s portion of unpaid rental income in the past years, 60% of the total assets be distributed to her by transferring to her the entire interest of EK Limited, Ast Limited and CM Limited, and a lump sum payment of the balance of her entitlement. The entire interest in SI Limited be transferred to H. They retain the other assets and liabilities held in their respective names.

D.  The Legal Principles

22.  The legal principles on determination of ancillary relief claims set out by the Court of Final Appeal in LKW v DD (2010) 13 HKCFAR 537 are well established. Regards will be given to the matters set out in section 7 of the Matrimonial Proceedings and Property Ordinance and the authoritative guidelines in LKW v DD.

E.  Identification of Assets

E1.  Landed Properties

23.  W identified the following landed properties owned by the parties directly or indirectly through different limited companies: 

	Description	Value	Liabilities	W net interest	H net interest
	Owned by EK Limited (W:40%, H:60%)
1	W Mansion Shop G (22.9.2009[1])	$16,450,000[2]	($11,126,013)	$23,569,595	$35,354,392
2	S Tower, Shop B (14.11.2003)	$15,800,000
3	S Tower, Shop C (14.11.2003)	$11,400,000
4	13 PH Street, G/F & M/F (21.10.2003)	$13,900,000
5	15 PH Street, G/F & M/F (21.10.2003)	$12,500,000
	Owned by SI Limited (W:50%, H:50%)
6	S Tower, Shop D (14.11.2003)	$8,800,000	($7,776,032)	$27,911,984	$27,911,984
7	S Tower, Shop E (14.11.2003)	$10,000,000
8	R Building, Portion 6 (31.8.1999)	$11,000,000
9	97 HP Street (30.5.2003)	$33,800,000
	Owned by Ast Limited (H:100%)
10	W Mansion, Shop H (22.9.2009)	$16,450,000[3]	($2,645,911)	$0	$18,104,089
11	WS Building, G/F, Shop B1 (23.8.2010)	$4,300,000
	Owned by CM Limited (H:100%)
12	CF Mansion, G/F, Shop 6 (30.4.2013)	$1,400,000	Nil	$0	$1,400,000
	Owned by FS Limited (H:50%)
13	WG Court, G/F with Flat Roof and Yard (13.5.2011)	$43,200,000	($4,262,263)	$0	$19,468,869
	1/3 owned by H
14	GC Court, G/F B (3.6.2004)	$11,300,000	($2,191,413)	$0	$3,036,196
15	C Garden 3B (20.11.2012)	$11,150,000 [C1/1099, 1101]	($3,590,747)	$0	$2,519,751
	100% owned by W
16	Belconnen, Australia (28.5.2020)	$2,135,466[4]	($1,700,000)	$435,466	$0
		Sub-total:		$51,917,045	$107,795,281
		Total:		$159,712,326

24.  Properties 1, 10, 11, 12 and 13 were acquired after W relocated to Australia in 2008 but before the petition for divorce. It was W’s evidence that the purchases were made with both parties’ agreement. These properties were acquired during the parties’ marriage from the family resources.

25.  Property 14 is a joint property purchased by H and his father (now deceased) in 2004. The interest owned by H’s late father was inherited by H and his two brothers in 2012. Property 15 is a property inherited by H and his two brothers from their late father in 2012. H inherited the relevant interests in these properties during the marriage. The value of these properties would be included for distribution upon the divorce of this long marriage.

26.  Property 16 was purchased by W in 2020 after presentation of divorce petition. W fairly made no claims to exclude this property from distribution.

E2.  Bank balance of the Companies’ bank accounts

27.  W found out through discovery from the banks that the family companies have the following bank balance:

		W	H
EK Limited	$22,327	$8,931	$13,396
SI Limited	$16,707	$8,353	$8,353
CM Limited	$195,172		$195,172
Ast Limited	$8,612		$8,612
FS Limited	$545,067		$272,533
		= $17,284	= $498,066

E3.  Assets and Liabilities Disclosed by the Parties

28.  H claimed the following liabilities in his Form E:

28.1.  Loan owed to Mr Lee in the sum of $1,300,000;

28.2.  Loan owed to XX企業有限公司in the sum of $5,740,110; and

28.3.  Loan owed to SI Limited in the sum of $3,749,783.

29.  No particulars nor satisfactory proof was provided to support these debts. In the absence of evidence, these liabilities should be disregarded.

30.  The assets and liabilities disclosed or discovered by the parties are therefore as follows:

Descriptions	W’s interest	H’s interest
Assets
Landed properties	$51,917,045	$107,795,281
Bank account balance (including securities)	$1,296,735	$828,690
Insurance	$80,972
Car	$116,159
Companies’ bank balance	$17,284	$498,066
Liabilities
Loan owed to W’s parents	($1,700,000)
2021 Loan owed to Li	($160,200)
2022 Loan owed to Li	($160,200)
2023 Loan owed to Wang	($160,200)
2024 Loan owed LYM	($106,800)
Sub-total:	$51,140,795	$109,122,037
Total:	$160,262,832

E4.  Undisclosed Assets

31.  W submitted that H failed to fully and frankly disclose his assets in these proceedings. Insofar as W was aware, H had been pocketing the rental income generated from the family’s landed properties to her exclusion for more than two years. Further, he failed to disclose his sizeable business of producing and selling mandarin peels and his Mainland bank accounts.

The Rental Income

32.  Most of the landed properties owned by the family companies were leased out. They generated monthly rental income of about $400,000 to $450,000 in the past.

33.  W produced tenancy agreements and the SJE’s site inspection report showing that these properties were still being leased out and occupied by tenants. The respective companies should have rental income.

34.  The management account of SI Limited showed that it has been receiving regular rental income. In 2017, it had a rental income of $1.5 million. It was reduced to $600,000 to $900,000 in 2021 and 2022. However, no corresponding records of these rental incomes could not be located in the bank statements of SI Limited.

35.  Similarly, there was no corresponding records of rental income in the bank statements of EK Limited despite evidence showed that the properties held by EK Limited were leased out to tenants.

36.  W estimated that these landed properties should generate at least $303,500 monthly rental income.

37.  As from May 2020, H ceased depositing rental income into the companies’ bank accounts. There was reason to believe that H hid these substantial amounts of rental income from the reach of W over the past years. The actual sum of rental income was not ascertainable due to H’s failure on disclosure. Instead of adding back the estimated rental income as contended by W, it is more appropriate to consider this issue at Step 4 when determining whether a departure from equal distribution is justified.

The PRC Mandarin Peels Business

38.  H had a business in the Mainland producing and selling mandarin peels. H claimed that this business (including plantation and processing facilities) was closed down in January 2019 and sold. A Land Transfer Contract dated 24 January 2019 signed by H as transferor showed that H sold a piece of land in the Mainland to a third party at the price of RMB5,980,000 ($6,458,400 at the rate of RMB1=HK$1.08). H failed to disclose the whereabout of this sum. I agreed with W that a sum of $6,458,400 shall be added back to the matrimonial pot.

Mainland bank accounts

39.  H was residing in and doing business in the Mainland. However, he had not disclosed all his Mainland bank accounts. This will be taken into account at Step 4 when determining whether a departure from equal distribution is justified.

E5.  The Matrimonial Pot

40.  Accordingly, for the purpose of this trial, the total value of the matrimonial pot was $166,721,232, out of which $51,140,795 was held by W and $115,580,437[5] was held by H.

F.  Departure from the starting point of equal distribution

41.  This is a long marriage of 26 years. The parties have an adult Son. The wealth of the family was built up by the contribution of both parties. Given the size of the matrimonial pot, there would be surplus after providing for the parties’ needs. This is a sharing case. The starting point of equal distribution of the matrimonial assets applies.

42.  By reasons of the following conduct of H, I am satisfied that there shall be a departure from equal distribution.

43.  Firstly, H’s material non-disclosure.

44.  Apart from the non-disclosure mentioned above, the disclosure made by H in his Form E and Answer were inadequate, evasive and misleading.

45.  He did not disclose in the Form E the value of assets owned by him including his landed properties, companies and MPF/retirement funds. He simply stated “未能確定” (cannot be ascertained) against those items. No follow up nor updated disclosure was made.

46.  He refused to file further evidence including answer to the 2^nd Questionnaire and the updated Form E despite directed by the Court.

47.  H did not provide an address in Hong Kong for service. The address he stated in Form E (江門市XX區XXX里排樓對面) was incomplete or wrong, creating difficulties and costs on service.

48.  He did not disclose the information and documents regarding the landed properties and companies held by the parties, as well as the renumeration he had received from these companies. It appeared that H had been defaulted in mortgage repayment, causing foreclosure by the bank. However, H failed to provide any information in this regard. W had to seek third party disclosure from the banks, causing unnecessary costs and delay.

49.  He had not disclosed the whereabout of his business in relation to the Wood Company and his bank accounts in the Mainland and Australia.

50.  He refused to provide information about the litigation commenced in his own name against a limited company for the recovery of the ownership and possession of two landed properties

51.  W found out from 3^rd party disclosure that H and his brothers casued a mortgage of Property 15 with Hang Seng Bank to support the borrowing of a MI Limited, which is owned by a BVI company. There is reason to believe that H has interest in MI Limited which he failed to disclose.

52.  Secondly, non payment of maintenance pending suit since about April 2022.

53.  Thirdly, embezzlement of rental income earned by the family companies since at least from 2020.

G.  Disposition

54.  Having considered the entirety of evidence before this Court and W’s proposal on the manner of distribution, I order that 62% of the total value in the matrimonial pot (i.e. $103,367,163) shall be allocated to W, and 38% (i.e. $63,354,069) shall be allocated to H in the following manner to be completed within 60 days from the date of this judgment:

54.1.  H do transfer to W his entire legal and beneficial interest in EK Limited, Ast Limited and CM Limited;

54.2.  H do pay W a lump sum of $23,219,110[6];

54.3.  W do transfer to H her entire legal and beneficial interest in SI Limited;

54.4.  W and H do retain the other properties held under their respective names.

55.  If H failed to execute the necessary documents to complete the transfer under paragraph 54.1 above within 75 days from the date of this judgment, pursuant to section 38A of the District Court Ordinance, [name], a senior partner of Chiu, Szeto & Cheng Solicitors be empowered to execute all necessary documents on behalf of H to effect the transfer in paragraph 54.1 above.

56.  For reference, the value of the respective companies are as follows:

56.1.  EK Limited: $23,569,595 + $35,354,392 + $22,327 = $58,946,314;

56.2.  Ast Limited: $18,104,089 + $8,612 = $18,112,701;

56.3.  CM Limited: $1,400,000 + $195,172 = $1,595,172;

56.4.  SI Limited: $27,911,984 + $27,911,984 + $16,707 = $55,840,675.

H.  Costs

57.  H was in control of the majoirty of the family assets. He failed to discharge his continuing duty to give full and frank disclosure thereby created unnecessary hurdles, extra costs and delay in W’s claims for ancillary relief. This should be reflected in the costs order. See: P v P (Finances – Ancillary Relief) [2006] 2 HKFLR 402; OG v AG [2020] EWFC 52.

58.  On a nisi basis, I order that H do pay W the costs of the ancillary relief proceedings on a party to party basis with certificate for two counsel, to be taxed if not agreed.

59.  I thank counsel for their assistance to the Court.